WRAPUP 1-Canada April inflation at 0.8 pct, smallest gain in 1-1/2 yrs

Fri May 22, 2015 9:21am EDT
 
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By Leah Schnurr

OTTAWA May 22 (Reuters) - Canada's annual inflation rate cooled to 0.8 percent in April, making for the smallest increase since October 2013 as energy prices tumbled, though economists did not see it altering the course of monetary policy for now.

A separate report by Statistics Canada Friday showed retail sales climbed for a second month in a row in March, as consumers spent more on cars, food and alcohol.

But economists and markets focused on the softer-than-expected inflation figures, with the Canadian dollar falling to its weakest in nearly a month immediately after the report.

April's decrease brought inflation below the lower end of the Bank of Canada's 1 to 3 percent target range, and fell short of economists' forecasts for 1 percent.

Still, it was broadly in line with the central bank's forecast that weaker energy prices could temporarily pull inflation down before the rate returns to 2 percent in 2016.

Economists said it was unlikely to have an impact on monetary policy in the short term. The Bank of Canada is widely expected to hold rates at 0.75 percent when it meets next week.

"It's not good numbers but it's as expected," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada.

Core inflation, which strips out volatile items and is closely watched by the bank, was firmer than the overall rate, even as it edged down to 2.3 percent from 2.4 percent in March.   Continued...